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Self-enforcing international environmental agreements and trade: taxes versus caps

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  • By Thomas Eichner
  • Rüdiger Pethig

Abstract

We study self-enforcing international environmental agreements (IEAs) in a model with symmetric countries, international trade, and emission tax policy and find that the first-best global IEA may be self-enforcing. This is in sharp contrast to the known case of cap-and-trade policy in which self-enforcing IEAs have fewer signatories and fail to achieve significant improvements in welfare and damage reduction compared to global non-cooperation. We provide necessary and sufficient conditions for global self-enforcing IEAs and show, amongst other things, that they are more likely with less severe climate damage. Another result is that their determinants are similar for climate coalitions playing Nash or being Stackelberg leaders.

Suggested Citation

  • By Thomas Eichner & Rüdiger Pethig, 2015. "Self-enforcing international environmental agreements and trade: taxes versus caps," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 897-917.
  • Handle: RePEc:oup:oxecpp:v:67:y:2015:i:4:p:897-917.
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    1. repec:eee:jeeman:v:85:y:2017:i:c:p:1-20 is not listed on IDEAS
    2. Eichner, Thomas & Pethig, Rüdiger, 2017. "Self-enforcing environmental agreements and trade in fossil energy deposits," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 1-20.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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